Digital Garage, Inc. 2Q of FYE March 31, 2018 Financial Report

Transcription

1 Digital Garage, Inc. of FYE March 31, 2018 Financial Report

2 Table of Contents Mission and Business Model 3 Investment Highlights 7 Group Financial Performance Review 12 Segment Performance Review 16 Appendix 31 Copyright 2017 Digital Garage, Inc. All Rights Reserved 2

3 Mission & Business Model Copyright 2017 Digital Garage, Inc. All Rights Reserved 3

4 Corporate Mission As a Digital Garage creates innovative business context for the new Internet age and provides unique business solutions for new lifestyles, society, and industries by linking Real & Cyber Local & International Marketing & Technology Present & Future Copyright 2017 Digital Garage, Inc. All Rights Reserved 4

5 DG s Business Model Producing and incubating Internet businesses by optimizing our 3 core strengths: IT, MT, and FT Information Technology Information Technology Marketing Technology Marketing Technology Financial Technology Financial Technology Copyright 2017 Digital Garage, Inc. All Rights Reserved 5

6 Enabling Platform for DG s Incubation Model DG continues to incubate and develop unique Internet services through its Enabling Platform since the early days of the Internet Ⅰ Ⅱ Ⅲ Portal/Search e-commerce/ Destination Site Social Media Advertising Payment 環亞智富有限公司 Advertising / Promotion Big Data Business e-commerce / Online Settlement Platform Enabling Platform Two Revenue Sources Copyright 2017 Digital Garage, Inc. All Rights Reserved 6

7 Investment Highlights Copyright 2017 Digital Garage, Inc. All Rights Reserved 7

8 Investment Highlights FY18.3 (cumulative): Sales 28.7 B JPY, operating income 1.4 B JPY, and income before income taxes 3.4 B JPY Strong MT/FT drove the performance. Progress rate of FY18.3 forecast: Sales 49% and income before income taxes 44% Ⅰ Ⅱ Ⅲ Consolidated result: YoY* sales grew by 21%, operating income grew by 56%, income before income taxes decreased by 26% Achieved record-high sales in (cumulative). Both MT and FT achieved best results in sales and income before income taxes. Income before income taxes decreased 26% to 3.4 B JPY, due to investment profit on equity method by change of fiscal term last year and decline of foreign exchange gain and extraordinary income. MT/FT: Continued strength of Internet ad/ Payment business, showed substantial increase in sales and profit MT marked substantial increase in sales and profits. Sales achieved 17.2 B JPY, YoY +29%, income before income taxes achieved 1.0 B JPY, YoY +40%. Mainline performance-based ads have been strong, smartphone/app business and social ad business have grown rapidly. FT sales achieved 10.1 B JPY, YoY +9%, and income before income taxes achieved 1.1 B JPY, YoY +24%. Transaction volume surpassed 700 B JPY and continued growth exceeding EC market. Non-EC payment, a key business area, has increased especially face-to-face settlement, cryptocurrency exchange settlement, and person-to-person settlement IT/LTI: Continuing active growth investment. Establish Mid-long term incubation structure of promising investment IT invested All Turtles which nurtured startups of AI related. Strengthen incubation stream links with US, Japan, Europe and Asia, and establish the foundation of Open Network Lab global expansion. LTI decreased income before income taxes due to the change of fiscal term last year. Acquired additional shares of DG Life Design, Inc., which develops life style supporting business, and making the company a consolidated subsidiary. Started mid-long term incubation on a full scale. DG Lab developed DG Lab DVEP TM for unique cryptocurrency. Offering it for digital regional currency and its experiment has already concluded. Note:* Due to the change of fiscal term last year into nine moths, the YoY comparisons here are between FY17.3 (cumulative) and FY18.3 (cumulative) for convenience. Copyright 2017 Digital Garage, Inc. All Rights Reserved 8

9 Investment Highlights: DG Lab Driven by R&D and fund investment focusing on five key fields, fully start development of key technologies that can be the center of next-gen business. Accelerated commercialization such as implementing feasibility tests and business alliances. BLOCK CHAIN Developing all-purpose flamework utilizing blockchain AI Developing service collaborating with data science Technologically cooperated with Blockstream Corp, DG Lab developed all-purpose framework DG Lab DVEP ( Digital Value Exchange Platform ) TM for unique cryptocurrency through blockchain. Feasibility tests by using digital regional currency have already concluded. Created a prototype of restaurant search service using information from Tabelog, a restaurant review site operated by Kakaku.com. Planning to offer as open platform. VR/AR Developing 新たな顧客体験をもたらすサービスを実現へ remote participation system for live performance Developed remote participation system for live performance, cooperated with partner companies. Data analysis solution within VR contents are also planned to be developed. Copyright 2017 Digital Garage, Inc. All Rights Reserved 9

10 Investment Highlights: DG Lab Established Smart City Planning Office, designing regional revitalization collaborated with DG Lab Fund Tokyo (Shibuya), Fukuoka, Sapporo Other areas are under consideration Smart City Project for regional revitalization Sapporo Project area in progress Sapporo AI Lab launched ocuments/sapporoailab.pdf (Japanese only) Developed by the Hokkaido Shimbun Press group and consortium (local bank, distribution, university, administration) Fukuoka Tokyo (Shibuya) FDC Launch Program Agreed with the Fukuoka Directive Council in Fukuoka City, named as a National Strategic Special Zone. Will develop with city, local banks, developer, and railroad companies. DG Lab Advisor Jun Murai Keio University Professor of Environment and Information Studies Other areas: under review Copyright 2017 Digital Garage, Inc. All Rights Reserved 10

11 Investment Highlights: DG Lab Fund Investment in startups with next generation technologies in blockchain/ AI/ biotech area ~ DG Lab implements technological development cooperate with fund investors/ sponsored companies/ portfolio companies ~ Core partners Sponsored companies and fund investors Sponsored companies (incl. plan): Bank, Securities, system developments, telecommunications etc Fund investors (incl. plan): IT, Bank, Securities, newspaper companies, construction, real estate firm etc LP Investment Investments examples Return Investment fields: Collaborate with 5 focuses of DG Lab Blockchain, AI, VR/AR, Security, Biotechnology Collaboration where invested in sponsored Business cooperation/r&d results R&D and experiments in strategical 5 focuses (Blockchain, AI, VR/AR, Security, Biotechnology) Blockstream [U.S./Canada] Develops sidechain technologies, parallel blockchains that are interoperable Entrupy [U.S.] Provides image recognition technology for identification/authentication of fraudulent products for the C2C marketplace. TupacBio [U.S.] Develops software to design DNA. Automated design for barcode arrangement and creation of mutants is also possible The Sync Project [U.S.] Constructs a music database for musical therapy suited to various symptoms, and provides services by combining machine learning. Invested in Promising Global 14 Startups after fund establishment Copyright 2017 Digital Garage, Inc. All Rights Reserved 11

12 Group Financial Performance Review Copyright 2017 Digital Garage, Inc. All Rights Reserved 12

13 FY18.3 (Cumulative) Consolidated P/L Summary YoY* sales grew by 21% record high of 28.7B JPY, operating income grew by 56% of 1.4B JPY, income before income taxes decreased by 26% of 3.4B JPY ~ Income before income taxes decreased due to investment profit on equity method by change of fiscal term last year and decline of foreign exchange gain and extraordinary income. Progress rate 44% ~ JPY in Millions A B ref. C (=B/A) FY17.3 Act (Cum.) (7-12) FY18.3 Act Cum. Progress Net sales 23,817 13,103 15,616 28, ,500 49% Operating income , Non-operating income 2, , Investment profit on equity method 1, , Foreign exchange gain Non-operating expenses Foreign exchange loss Ordinary income 3,315 1,111 1,567 2, Extraordinary income 1, Gain on sales of investments in securities 1, Income before income taxes 4,702 1,830 1,664 3, ,000 44% Income taxes 1, (4-6) FY18.3 Net income attributable to owners of parent 3,693 1,267 1,223 2, ,500 45% Act (7-9) FY18.3 Act (Cum.) (7-12) Note:* YoY here means comparing FY17.3 cumulative with FY18.3 cumulative, due to the change of fiscal term last year. YoY % Full Year Forecast FY18.3 Copyright 2017 Digital Garage, Inc. All Rights Reserved 13

14 FY18.3 (Cumulative) Consolidated Segment P/L Summary Both MT and FT showed substantial increase in sales and profit, and achieved record-high results ~ IT and LTI decreased extraordinary income and income before income taxes due to the change of fiscal term last year ~ FY17.3 JPY in Millions Act (Cum.) (7-12) A B ref. C (=B/A) FY18.3 FY18.3 FY18.3 YoY FY18.3 Act Act Act Full Year (Cum.) % (Cum.) (4-6) (7-9) Forecast (4-9) Progress Net sales 23,817 13,103 15,616 28, ,500 49% MT Marketing Technology 13,394 7,800 9,499 17, ,000 54% FT Financial Technology 9,329 4,951 5,208 10, ,500 50% IT Incubation Technology 1, , ,000 21% LTI Long Term Incubation Income before income taxes 4,702 1,830 1,664 3, ,000 44% MT Marketing Technology , ,750 63% FT Financial Technology , ,300 50% IT Incubation Technology 1, ,800 3% LTI Long Term Incubation 1, , ,500 50% Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc Copyright 2017 Digital Garage, Inc. All Rights Reserved 14

15 FY18.3 Consolidated B/S Summary JPY in Million FY17.3 FY18.3 Difference Reason for change / Remarks Current assets 59,624 65,707 +6,082 Cash and deposits 23,029 24,732 +1,702 Receivables 15,422 17,728 +2,306 Money held in trust 2,264 3,342 +1,077 Operational investment securities 11,856 13,021 +1,164 Fixed assets 32,061 32, Investment securities 18,357 15,216-3,141 Goodwill 5,411 8,160 +2,749 Total assets 91,686 97,997 +6,310 Income by the sales of investment securities, new borrowings etc Expansion of FT business Expansion of FT business New investment, Mark-to-market, etc Sales of investment securities, Transfer of investment securities of DG Life Design that has become a consolidated subsidiary to goodwill, Increased investment profit on equity method Consolidation of DG Life Design, Inc. Current liabilities 38,815 42,158 +3,343 Deposits 25,127 26, Short-term borrowing 6,937 8,923 +1,986 Fixed liabilities 18,499 19,633 +1,133 Long-term borrowing 17,207 18,614 +1,406 Total liabilities 57,315 61,792 +4,476 Net assets 34,371 36,205 +1,833 Shareholders' equity 31,633 33,418 +1,784 Common stock 7,437 7, Capital surplus 2,946 3, Retained earnings 21,300 22,850 +1,549 Accumulated other comprehensive income 1,956 1, Unrealized gains on securities Liabilities / Net assets 91,686 97,997 +6,310 Demands for working capital by expansion of FT business Short-term borrowings shifted to long-term as long-term interest rates get lowered Increased net profit Copyright 2017 Digital Garage, Inc. All Rights Reserved 15

16 Segment Performance Review Copyright 2017 Digital Garage, Inc. All Rights Reserved 16

17 MT Segment Ⅰ Marketing Technology Segment Net Sales Income Before Income Taxes FY17.3 (7-12) Actual 13,394 M JPY 784 M JPY FY18.3 (4-9) Actual 17,299 M JPY 1,098 M JPY FY18.3 Forecast 32,000 M JPY 1,750 M JPY Marketing Technology Company Supports client s business through performance-based ads, Online to Offline strategy and web marketing Business Design Company Offers consulting-based marketing BI.Garage, Inc. Develops and provides ad products incorporating data science, social marketing, and cutting edge ad technology NaviPlus Co., Ltd. Offers website support tools including personalized recommendation engines Copyright 2017 Digital Garage, Inc. All Rights Reserved 17

18 MT Segment Highlights Substantial increase in net sales and profit: Net sales in marked 9.4 B JPY, +45% compared to FY17, operating income marked 0.6 B JPY, +67% ~ Operating margin which shows profitability increased to 42% ~ Net Sales Operating Income Operating Margin FY16.6 FY17.3 FY18.3 FY16.6 FY17.3 FY18.3 (JPY in 100 Million) (JPY in 100 Million) 94 (+45%) 6.1 (+67%) (JPY in 100 Million) FY17.3 (7-9) FY18.3 (7-9) YoY Net sales Gross profit Op. income (A) (B) % + 37% + 67% 4Q 3Q 4Q 3Q Operating margin (B) (A) 34.7% 42.4% +7.7 points (4-6) (7-9) (10-12) (1-3) (4-6) (7-9) (4-6) (7-9) (10-12) (1-3) (4-6) (7-9) Smartphone/app business was major contribution Net sales expansion made gross margin increased, and increased employment cost and fixed cost were absorbed Copyright 2017 Digital Garage, Inc. All Rights Reserved 18

19 MT Segment Highlights Sales of performance-based ads increased in all industries, smartphone/app business has grown rapidly ~ Sales of smartphone/ app business increased to 3.5B JPY, 2.4x compared to FY17 ~ Net sales by industries (Performance-based ads) FY16.6 FY17.3 FY18.3 Main industry Compared to FY17 with FY18 (JPY in 100 Million) 79 All + 54 % Smartphone/ App Cosmetics/ HR/Others Entertainment/ Game Cosmetics/ Medicine/HR/ Foods etc 2.4 x + 37 % Financial Q 3Q (4-6) (7-9) (10-12) (1-3) (4-6) (7-9) Smartphone/App has grown rapidly Banks/ Securities/ Credit cards/ Insurance etc + 8 % Copyright 2017 Digital Garage, Inc. All Rights Reserved 19

20 MT Segment Growth Strategies and Approaches Creating new products based on technologies and generate the value of client/ media ~ Supporting clients to expand overseas ~ Value creation for 5 th generation of mobile communication system utilizing the latest technology Product Development App Payment Expansion of media value CRM Performancebased ads Web Strategy Latest Technology Main approaches Internet ads/ Promotion Data Science Global Further cultivation of performance-based ads From consulting business to providing solutions for the clients Providing DMP to store the original data, and promoting advertising products Strengthen the collaboration with Kakaku.com Implement Media Consortium targeting to improve media value and brand value Joint development the official contents for Chinese visitors to Japan of Tencent. Supporting the inbound marketing. Global expansion Consulting clients to support their business to expand overseas Copyright 2017 Digital Garage, Inc. All Rights Reserved 20

21 FT Segment Ⅱ Financial Technology Segment Net Sales Income Before Income Taxes FY17.3 (7-12) Actual 9,329 M JPY 931 M JPY FY18.3 (4-9) Actual 10,159 M JPY 1,157 M JPY FY18.3 Forecast 20,500 M JPY 2,300 M JPY econtext ASIA Ltd. Payment corporation to expand e-commerce platforms globally econtext, Inc. Integrates online and offline business as the convenience store payment pioneer VeriTrans Inc. Provides leading e-commerce payment solutions ANA Digital Gate, Inc.(49% stake/equity method) Develops and offers the new payment solution by FinTech PT MIDTRANS(Veritrans Indonesia) (21.81% owned by econtext ASIA/Non-consolidated) Indonesian JV Sendo Technology JSC (12.89%/Investment) On-line marketplace for C2C and B2C in Vietnam Copyright 2017 Digital Garage, Inc. All Rights Reserved 21

22 FT Segment Highlights Net sales in marked 5.2 B JPY, +15% compared to FY17, operating income marked 0.6 B JPY, +23% ~ Operating margin which shows profitability increased to 42%, +2.7points ~ Net Sales Operating Income Operating Margin FY16.6 FY17.3 FY18.3 FY16.6 FY17.3 FY18.3 (JPY in 100 Million) 42 (+15%) (JPY in 100 Million) (+23%) (JPY in 100 Million) Net sales Gross profit (A) FY17.3 (7-9) FY18.3 (7-9) YoY + 15% + 15% Op. income (B) % Operating margin (B) (A) 39.3% 42.0% +2.7 points 4Q 3Q (4-6) (7-9) (10-12) (1-3) (4-6) (7-9) Growth of existing client and acquisition of major EC companies are contributed 4Q 3Q (4-6) (7-9) (10-12) (1-3) (4-6) (7-9) As transaction record increased, gross profit expanded, and achieved record high operating income Operating margin improved by sales growth which exceeded the expenses of strengthen the system operation Copyright 2017 Digital Garage, Inc. All Rights Reserved 22

23 FT Segment Highlights Transaction marked approx. 360 B JPY, +17% compared to FY17, exceeded EC market growth ~ Face-to-face payments, cryptocurrency exchange settlement, and person-to-person payments have expanded rapidly in Non-EC payment, a focusing area ~ Transaction Record FY16.6 FY17.3 FY18.3 FY17.3 Transaction volume in focusing area (Non-EC payment) FY18.3 Compared to FY17 with FY18 (JPY in 100 Million) (+17%) 3,640 All 1.9 x 2,980 3,091 3,441 3,423 3,405 Specific Market (Real estate/ Funeral) Person-to-person payments (Remittance payments) + 48 % + 22 % Face-to-face payments (Mobile payments) Charging/Exchange settlement (Cryptocurrency) 4.0 x 4.2 x 4Q (4-6) (7-9) (10-12) 3Q (1-3) (4-6) (7-9) Exceeded EC market growth 9.9% CtoC field has been strong continuously (7-9) (7-9) Copyright 2017 Digital Garage, Inc. All Rights Reserved 23

24 FT Segment Progress of Strategic Area Developing the new growth area as a payment platformer in FinTech ~ Following Non-EC payment and face-to-face payment, launching public fund payment and utility fees payment ~ Market Environment Growth Strategy Main approaches EC payment: Organic growth (10-15%) Ⅰ Non-EC payment/ Face-to-face payment Specific market (Real estate/ Restaurants/ Funeral etc) Barcode payment New area (public fund payment/ utility fees payment etc) = New Approaches Payment for Real estate/ Restaurants/ Funeral etc Barcode payment Remittance service Cryptocurrency exchange settlement Undertaking the collection business by credit card of the National Pension Insurance Theme in FT segment Cashless society Ⅱ Alliance Payment cooperation with business partners having large customer base New business with alliance Develop face-to-face payment of stores in airport shops cooperating with ANA group. Charge payment at convenience store Vitalizing the local economies Inbound Next generation payment (FinTech) Ⅲ Next generation payment Solution utilizing blockchain Experiments cooperating with DG Lab Correspond to CloudSign Payment based on smart contract Copyright 2017 Digital Garage, Inc. All Rights Reserved 24

25 IT Segment Ⅲ Incubation Technology Segment Net Sales Income Before Income Taxes FY17.3 (7-12) Actual 1,070 M JPY 1,507 M JPY FY18.3 (4-9) Actual 1,239 M JPY 121 M JPY FY18.3 Forecast 6,000 M JPY 3,800 M JPY DG Incubation, Inc. Invests in and incubates cutting-edge Internet startups Open Network Lab, Inc. Provides support to Internet-business entrepreneurs with global visions Digital Garage US, Inc. The US-based global strategy headquarters DK Gate, Inc. (66% stake) Invests in and incubates next generation content with Kodansha globally DG Technologies, Inc. (80% stake) Drives strategic technology development with DG Lab DG Daiwa Ventures, Inc.(50% stake/equity method) Manages DG Lab Fund to invest in startups with next-generation technologies Kodansha Advanced Media LLC(19% stake/investment) Marketing in digital distribution in US and English-speaking countries, film adaptation, event planning, etc Copyright 2017 Digital Garage, Inc. All Rights Reserved 25

26 IT Segment Highlights A partial sale of shares hold, and income before income taxes turned positive for the first time in three quarters ~ Active investment has continued. New CIO has been appointed for strengthen investment activity in US/Asia ~ Income before income taxes Major Portfolio FY16.6 FY17.3 FY Equity Domestic Overseas Fund Total 1.4 4Q 3Q # of companies Book Value 2.3 Book Value B JPY B JPY B JPY B JPY B JPY (JPY in 100 Million) Note)DG Incubation s investment balance Mark-to-market as of quarter end for listed stocks. Equity includes convertible note.book value totals may not match details because of rounding down fractions Blockstream [U.S. /Canada] Develops sidechain technologies, parallel blockchains that are interoperable Droom [India] A leading online marketplace for new and second-hand automobiles in India Wevr [U.S.] Virtual reality community and VR media player for aspiring and professional creatives PureTech Health [U.S.] A US based company that focuses on incubation in advanced biotechnology field. Listed on LSE. Welby [Japan] Builds apps for patients with chronic malady, diabetes, cancers Goodpatch [Japan] Web development and consulting service firm Monstar Lab[Japan] Operates Sekai Lab, a global outsourcing platform that provides a network of over 10 k engineers in over 15 countries Panair [Japan] Provides Odin, an automated electricity retail platform that uses cloud computing and artificial intelligence. Copyright 2017 Digital Garage, Inc. All Rights Reserved 26

27 Topics: Supporting Globalization of Startups Starting the global networking of AI/FinTech related ~ Developing cooperation globally of a seed accelerator Open Network Lab ~ TOKYO SAN FRANCISCO / NEW YORK / BOSTON ASIA / HONG KONG A Invested in All Turtles which nurtures startups of AI related Approaches : Closer cooperation of US, Japan, Europe and Asia, and supporting startups globally Investing in All Turtles, and launched AI project linking Silicon Valley, Tokyo and Paris Through the cooperation with DG Lab, technical alignment in AI, Fintech, AR/VR and strengthen development structure Copyright 2017 Digital Garage, Inc. All Rights Reserved 27

28 LTI Segment Ⅳ Long-term Incubation Segment Net Sales Income Before Income Taxes FY17.3 (7-12) Actual 23 M JPY 1,928 M JPY FY18.3 (4-9) Actual 20 M JPY 1,247 M JPY FY18.3 Forecast - 2,500 M JPY Kakaku.com, Inc.(20%/Equity method affiliate) Operates purchase support service, Kakaku.com and restaurant review and restaurant service, tabelog, etc. DG Life Design, Inc.(70%) With its mission of providing Valuable Life, expanding life care business, sports marketing business and wine school business. DK Media, Inc.(50%/Equity method affiliate) Internet media business utilizing fashion magazines by Kodansha Copyright 2017 Digital Garage, Inc. All Rights Reserved 28

29 LTI Segment Highlights Income before income taxes decreased compared to FY17 due to fiscal term change, while +12% in real terms compared to (7-9) FY17 ~ Investment profit on equity method of Kakaku remains robust ~ Income before income taxes (JPY in 100 Million) 12.5 FY17.3 FY18.3 Income before income taxes in was 0.69 B JPY, decreased 45% compared to (4-6) (7-9) (+12%) FY17 Special factors in FY B JPY Due to change of fiscal term, investment profit on equity method of Kakaku.com,Inc. was booked for 6 months FY B JPY FY B JPY Decreased by 0.6 B JPY (7-9) (10-12) 3Q (1-3) (4-6) (7-9) Note) FY17.3 booked 6 months (Apr.-Sep.) of investment profit on equity method of Kakaku.com, Inc. Excluded special factors, income before income taxes in was +12% compared to (7-9) FY17 Copyright 2017 Digital Garage, Inc. All Rights Reserved 29

30 LTI Segment Highlights DG Life Design, Inc. has become a consolidated subsidiary, and establish mid-long incubation structure ~ Next generation technological innovation cultivates the cross-functional business which will be next mainstay ~ LTI Strategy/ Business progress of other than kakaku.com, Inc. DG grouping of invested companies, JV establishment with alliance companies Incubation of new business, business expansion by collaboration with DG group Creation of long and sustainable business profit Business progress of Kakaku.com, Inc. Total Accumulated Traffic for Kakaku.com Group (in million people) Monthly traffic for all sites of Kakaku.com has increased to million, up 29.1% yoy (September 2017) YoY +29.1% Lifestyle support business Acquired additional shares of DG Life Design, Inc. and making the company a consolidated subsidiary Strengthen collaboration with DG group based on existing profitability model Contents business (JV with Kodansha) Started compilation media HOLICS combining good contents and AI technology Mar June Sept Dec Mar June Sept Dec Mar June Sept Ref. Kakaku.com, Inc. Results Briefing for FY2018/3 Copyright 2017 Digital Garage, Inc. All Rights Reserved 30

31 Appendix Copyright 2017 Digital Garage, Inc. All Rights Reserved 31

32 Financial results by quarters: Consolidated sales Consolidated sales FY16.6 FY17.3 FY18.3 (+35%) 156 As reference, comparisons showed here are between (7-9) FY18.3 and (7-9) FY17.3 in real terms which is the same period of last year sales marked 15.6 B JPY, record-high results in quarterly, up 35% compared to FY17. Achieved 4-quarters consecutive increase in sales 3Q 4Q 3Q (JPY in 100 Million) Both MT and FT segments sustained high growth and it drove the consolidated sales growth (7-9)(10-12)(1-3) (4-6) (7-9)(10-12)(1-3) (4-6) (7-9) Copyright 2017 Digital Garage, Inc. All Rights Reserved 32

33 Financial results by quarters: Consolidated operating income Consolidated operating income FY16.6 FY17.3 FY Q 10.9 (2.3 X) Q 3Q (JPY in 100 Million) operating income marked 0.95 B JPY, 2.3 times bigger than FY17 operating income ratio marked 6.1%, up 2.5 points compared to FY17 of 3.6%, then improved profitability Achieve the good balance of high growth potential and improvement of profitability Achieved 2-quarters consecutive increase in operating income, after hitting the lowest in 3Q FY17 (7-9)(10-12)(1-3) (4-6) (7-9)(10-12)(1-3) (4-6) (7-9) Copyright 2017 Digital Garage, Inc. All Rights Reserved 33

34 Financial results by quarters: Consolidated income before income taxes Consolidated income before income taxes FY16.6 FY17.3 FY18.3 Extraordinary income Income before income taxes - Extraordinary income Q (7-9) (10-12) (1-3) Q Kakaku.com,Inc. Investment profit on equity method Q (4-6) (7-9)(10-12) (1-3) 6 (4-6) 6 (7-9) by fiscal term change (-47%) 1 15 (4-6) (7-9) 6 Kakaku.com,Inc. Investment profit on equity method (JPY in 100 Million) income before income taxes marked 1.6 B JPY, decreased 47% compared to FY17 Special factors in FY B JPY Due to change of fiscal term, investment profit on equity method of Kakaku.com,Inc. was booked for 6 months FY B JPY FY B JPY Decreased by 0.6 B JPY Booked extraordinary income 1.38 B JPY Excluded special factors, income before income taxes in was up 37% compared to FY17 Kakaku Investment profit on equity method FY17.3 期 FY18.3 期 Compared 前年 to FY17 比 (7-9) (7-9) カカクコム持分法投資利益 (4-6) 内 (4-6) 6.2 (7-9) 内 (7-9) 特別利益 Extraordinary income 税引前利益 Income before income taxes % - 内 特殊要因 ( 特別利益及び Special factors (Extraordinary income and FY17 Kakaku irregular settlements of account 前期 カカクコム変則決算 ) Income before income taxes special factors 税引前利益 - 特殊要因 % Copyright 2017 Digital Garage, Inc. All Rights Reserved 34

35 Financial results: Consolidated Profit and Loss FY14.6 FY15.6 FY16.6 FY17.3 FY18.3 JPY in Millions (Full Year (Full Year (Full Year (Full Year Act) (Full Year Act) Act) Act) 9 month FCST) Net sales 33,751 38,087 43,763 36,451 58,500 Operating income 2,608 4,809 4, Non-operating income 2,307 3,736 3,031 3,246 Investment profit on equity method 1,741 2,080 2,406 2,528 Foreign exchange gain 143 1, Non-operating expenses , Foreign exchange loss Ordinary income 4,442 7,610 6,193 3,678 Extraordinary income 630 2,463 1,392 2,265 Gain on sales of investments in securities ,829 Gain on sales of shares of sub. and associates Gain on change in equity 374 2, Gain on transfer of business Extraordinary loss Impairment loss Income before income taxes 5,035 9,248 7,574 5,819 8,000 Income taxes 1,887 3,855 2,385 1,525 Net income attributable to owners of parent 2,847 5,081 5,165 4,289 5,500 Note: Kakaku,com.Inc. is affiliated company for using the equity method, and started to apply IFRS from FY18.3. The figures on FY17.3 has been applied retrospectively. Copyright 2017 Digital Garage, Inc. All Rights Reserved 35

36 Financial results: Consolidated Profit and Loss by segments JPY in Millions FY14.6 FY15.6 FY16.6 FY17.3 FY18.3 (Full Year (Full Year (Full Year Act) Act) Act) (Full Year Act) 9 month (Full Year FCST) Net sales 33,751 38,087 43,763 36,451 58,500 MT Marketing Technology 14,822 16,064 21,028 20,494 32,000 FT Financial Technology 13,454 14,568 16,392 14,140 20,500 IT Incubation Technology 5,475 7,454 6,343 1,775 6,000 LTI * Long Term Incubation Income before income taxes 5,035 9,248 7,574 5,819 8,000 MT Marketing Technology 874 1,061 1,396 1,074 1,750 FT Financial Technology 1,496 1,335 1,758 1,478 2,300 IT Incubation Technology 1,595 2,804 3, ,800 LTI * Long Term Incubation 1,776 4,477 3,052 2,899 2,500 Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc MI segment has been changed to LTI segment from FY18.3, by aiming to generate sustainable business profit in mid-long term. Some businesses in IT segment have transferred to LTI, therefore figures on FY17.3 updated with the current category. Copyright 2017 Digital Garage, Inc. All Rights Reserved 36

37 Press Releases Date Title Digital Garage Appoints Brian Yeh as Chief Investment Officer of DG Incubation to Strengthen North American and Asian Investment Businesses VeriTrans to Provide Ministry of Health, Labour and Welfare with Credit Card Payment Service to the National Pension Fund DG Lab Developed All-Purpose Framework "DG Lab DVEP" TM for Unique Cryptocurrency through Blockchain's Bitcoin DG Lab Fund Invested in Skydisc, a Cloud Service Using AI/IoT as the Fukuoka City's Startup Support Program's First Project Digital Garage and Tencent to Co-develop "QQ Odekake Japan", Mobile QQ's Contents for Japan-bound Chinese Tourists DG Lab to Host THE NEW CONTEXT CONFERENCE 2017 SAN FRANCISCO Digital Garage Begins Support for Startups in Fukuoka Region in Cooperation with the Fukuoka Directive Council DG Lab Fund Invested in 12 Start-ups with Next-Generation Technology in Fields such as Blockchain, AI, and Biotech Collaboration Partners Selected for TOYOTA NEXT, the Open Innovation Program Supported by Digital Garage Digital Garage Hosted "Digital Garage First Penguin Award 2017", which Honors Leaders who Creatively Challenge The World DG Lab to Unveil Open Platform for Interactive Agent Technology that Uses Artificial Intelligence Digital Garage to Invest in AI Technology Startup Studio All Turtles and Support their Business Development in Japan. THE NEW CONTEXT CONFERENCE 2017 TOKYO on July The Event will Focus on Biotechnology and Blockchain Digital Garage officially launches lifestyle service for wealthy consumers Business integration with two subsidiaries leads to development of DG Life Design business Blockstream Launches New Confidential Assets Feature for Enterprise Blockchain Customers (Press Release of Blocksteam) Copyright 2017 Digital Garage, Inc. All Rights Reserved 37

38 Please note that the business forecasts and strategies covered in today s presentation are based on our current evaluation and future results may vary significantly depending on unforeseeable events or circumstances. This announcement is solely for the purpose of the investors relationship and is not for making any solicitation for investment in any securities. This announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any securities of our consolidated subsidiaries have not been registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act") and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the U.S. Securities Act. Any public offering of securities to be made in the United States will be made by means of a prospectus. Such prospectus will contain detailed information about the company making the offer and its management and financial statements.